Gold settles under $1,600 after two-session climb

Prices fall as U.S. equities rally; gold vs. platinum spread narrows

SarahTurner

SAN FRANCISCO (MarketWatch) — Gold futures fell Wednesday to settle back under $1,600 an ounce after a two-session climb of nearly 3%, as investors bid up U.S. equities in the wake of strong data on domestic housing.

Gold for delivery in April
US:GCJ3
fell $19.80, or 1.2%, to settle at $1,595.70 an ounce on the Comex division of the New York Mercantile Exchange. Prices had traded as high as $1,614.40 during the session.

The metal on Tuesday rose $28.90, or 1.8%, to settle at $1,615.50 an ounce. That was gold’s biggest one-day gain in 2013.

“Investors were once again seeking risk in the form of equities,” said Fawad Razaqzada, technical analyst at GFT Markets, in a note, citing easing worries over Italy’s fiscal woes following a successful debt auction in Rome. “We also saw a big rise in U.S. pending home sales which further discouraged defensive positioning.”

“The European Union and its sovereign debt problems are still simmering on the front burner of the marketplace,” said Jim Wyckoff, senior analyst at Kitco.com, in a note Wednesday. “The Italian elections failed to show a clear winner as voters ostensibly rebuked present government austerity measures.”

Bernanke’s comments were “very supportive for gold in 2013 and beyond,” said Jeffrey Wright, managing director at Global Hunter Securities.

“Further QE measures by the FOMC, such as purchasing of assets ... are funded by the expansion of the Fed’s balance sheet,” he explained. “Over time, this degrades the value of the U.S. dollar compared with other currencies and can lead to inflation in the economy.

“Gold as a U.S. dollar-denominated commodity, appreciates with a lower U.S. dollar and is viewed as a hedge against inflation,” said Wright.

Meanwhile, the U.S. government’s “likely inability to agree on a taxing and spending plan by the March 1 sequestration deadline is added to a nervous and uncertain atmosphere in the world marketplace this week,” said Wyckoff. “That’s also a mildly supportive factor for the safe-haven investment assets this week.” See: The sequester starts Friday. Then what?

Gold tallied a gain of nearly $43, or 2.7%, on Monday and Tuesday. It poised for a loss of around 4% for the month.

Silver tracked gold prices lower Wednesday, with May silver
US:SIK3
down 34 cents, or 1.1%, to $28.99 an ounce.

Other metals ended mostly lower. May copper
US:HGK3
fell nearly 2 cents, or 0.5%, to $3.57 a pound and palladium for delivery in June
US:PAM3
closed up $3.75, or 0.5%, to $745.65 an ounce.

The platinum/gold spread was “probably a bit overdone in platinum’s favor anyway,” said Tim Murray, general manager of precious-metals marketing at Johnson Matthey. “With tensions [at mining operations] easing in South Africa, it makes sense that traders would unwind the trade a bit.”

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